Welch v. Metropolitan Life Ins. Co.

• Decision Date: 06 March 2007
• Docket Number: No. 04-56768.,04-56768.
• Citation: 480 F.3d 942
• Parties: Vicki WELCH, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY; Kaiser Foundation Health Plan, Inc., Long Term Disability Plan; Kaiser Foundation Health Plan, Inc., Medical Plan; Kaiser Foundation Health Plan, Inc., Life Insurance Plan; Kaiser Foundation Health Plan, Inc., Retirement Plan, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

480 F.3d 942

Vicki WELCH, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY; Kaiser Foundation Health Plan, Inc., Long Term Disability Plan; Kaiser Foundation Health Plan, Inc., Medical Plan; Kaiser Foundation Health Plan, Inc., Life Insurance Plan; Kaiser Foundation Health Plan, Inc., Retirement Plan, Defendants-Appellees.

No. 04-56768.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 19, 2006.

Filed March 6, 2007.

Lisa S. Kantor (argued) and Glenn R. Kantor, Kantor & Kantor LLP, Northridge, CA, for the plaintiff-appellant.

Eric R. McDonough (argued) and Lawrence E. Butler, Seyfarth Shaw LLP, Los Angeles, CA, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; Percy Anderson, District Judge, Presiding. D.C. No. CV-04-00084-PA.

Before: FISHER and CALLAHAN, Circuit Judges, and COLLINS,^* District Judge.

FISHER, Circuit Judge:

Plaintiff-Appellant Vicki Welch appeals the district court's order awarding her attorney's fees under 29 U.S.C. § 1132(g)(1). She disputes the district court's decisions to award fees at an hourly rate of $250, to apply across-the-board reductions in the number of hours requested because Welch's attorneys block billed and billed in quarter-hour increments and to disallow time incurred for discrete tasks such as attorney conferences. We affirm the district court's fee award in most respects but reverse in part, holding that the district court erred in setting Welch's counsel's hourly rate at $250 and in imposing a 20 percent across-the-board reduction for block billing. We remand for a new determination of the court's fee award.

FACTUAL AND PROCEDURAL BACKGROUND

Welch sued Defendant-Appellee Metropolitan Life Insurance Company (MetLife) under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1191, alleging that MetLife improperly denied her benefits under a longterm disability plan. See 29 U.S.C. § 1132. Six months after Welch filed suit MetLife agreed to honor Welch's claim. Thereafter, Welch moved for an award of costs and attorney's fees pursuant to 29 U.S.C. § 1132(g)(1), requesting $39,112 in fees for 11.5 hours of work at $375 per hour and 87 hours of work at $400 per hour (for work after January 1, 2004).

In support of her motion, Welch submitted declarations from four experienced ERISA attorneys who attested that they charge clients between $400 and $475 per hour. In one declaration, attorney Ronald Dean said that his $475 hourly rate "is not contingent upon the result." In addition, Welch submitted four district court orders granting fees to lawyers from Kantor & Kantor LLP — the law firm representing Welch — at rates of $300 to $375 per hour.

MetLife opposed Welch's motion for attorney's fees, arguing that the requested fees were unreasonable. Although asserting that Welch's requested hourly rates were unreasonable, MetLife submitted four complaints that Kantor & Kantor had recently filed in the Central District of California in which the firm had requested fees on behalf of its client at the rate of $375 per hour.¹ MetLife presented no other evidence regarding the prevailing market rate for ERISA plaintiffs' lawyers.

The district court awarded fees to Welch, but reduced the requested hourly rate to $250. The court also imposed a 20 percent across-the-board reduction in the number of hours requested because Kantor & Kantor had block billed its time, and a 20 percent across-the-board reduction because Kantor & Kantor billed in quarter-hour increments.² Finally, the court reduced the hours requested for time spent in meetings between firm lawyers, conducting discovery, preparing a case analysis memo and preparing the motion for attorney's fees. In sum, the district court awarded fees for 43.05 hours of work rather than the 98.5 hours requested. The court's reductions resulted in a final award of $10,762 in attorney's fees to Welch.

STANDARD OF REVIEW

ERISA permits district courts to award "reasonable" attorney's fees and costs to either party. See 29 U.S.C. § 1132(g)(1). On appeal, we review the district court's award for abuse of discretion. Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir.2000). "An abuse of discretion is found only when there is a definite conviction that the court made a clear error of judgment in its conclusion upon weighing relevant factors." Hope v. Int'l Bhd. of Elec. Workers, 785 F.2d 826, 831 (9th Cir.1986) (citation omitted). We review de novo the district court's determination of questions of law. Cann v. Carpenters' Pension Trust Fund for N. Cal., 989 F.2d 313, 315 (9th Cir. 1993).

DISCUSSION

To calculate attorney's fees awarded under § 1132(g)(1), district courts utilize a two-step hybrid lodestar/multiplier approach. First, the court establishes a lodestar by multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate. See Van Gerwen, 214 F.3d at 1045. The party seeking fees bears the burden of documenting the hours expended in the litigation and must submit evidence supporting those hours and the rates claimed. See Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). In determining the appropriate lodestar amount, the district court may exclude from the fee request any hours that are "excessive, redundant, or otherwise unnecessary." Id. at 434, 103 S.Ct. 1933. In addition to setting the number of hours, the court must also determine a reasonable hourly rate, "considering the experience, skill, and reputation of the attorney requesting fees." Chalmers v. City of Los Angeles, 796 F.2d 1205, 1210 (9th Cir. 1986). Second, in rare and exceptional cases, the district court may adjust the lodestar upward or downward using a multiplier based on facts not subsumed in the initial lodestar calculation. See Van Gerwen, 214 F.3d at 1045.

Recognizing that the district court has the benefit of first-hand contact with the litigation and the lawyers involved, we review a district court's award of fees deferentially. See Hensley, 461 U.S. at 437, 103 S.Ct. 1933 (according deference to district court "in view of the district court's superior understanding of the litigation and the desirability of avoiding frequent appellate review of what essentially are factual matters").

I. Reasonable Hourly Rate

The district court denied Welch's fee request for reimbursement at the rates of $375 and $400 per hour, instead finding $250 to be a reasonable rate. This reduced rate was based on the district court's finding that "[t]here is no evidence that Plaintiff's counsel ever collects $375 or $400 per hour from paying clients except as part of an award of attorneys' fees issued by a court"; the court's belief that Kantor & Kantor's hourly rates "have been inflated to include a contingency multiplier"; and the court's consideration of "the relevant market rates in the community for this type of matter." We conclude that the district court clearly erred.

First, the district court erred in reducing Welch's requested rate because Kantor & Kantor does not collect $375 and $400 from its paying clients. We have repeatedly held that the determination of a reasonable hourly rate "is not made by reference to the rates actually charged the prevailing party." See, e.g., Mendenhall v. Nat'l Transp. Safety Bd., 213 F.3d 464, 471 (9th Cir.2000) (quoting Chalmers, 796 F.2d at 1210). Rather, billing rates "should be established by reference to the fees that private attorneys of an ability and reputation comparable to that of prevailing counsel charge their paying clients for legal work of similar complexity." Davis, 976 F.2d at 1545; see also Carson v. Billings Police Dep't, 470 F.3d 889, 892 (9th Cir.2006) (holding that the prevailing market rate — not the individual contract between the applicant attorney and the client — "provides the standard for lodestar calculations").

Second, reduction may have been improper because there was insufficient evidence that Kantor & Kantor inflated its hourly rates above the prevailing market rate due to the contingent nature of its practice. In support of its reduction, the district court relied on a fee motion the Kantor & Kantor firm had submitted in an unrelated case, in which the firm justified its hourly rate by stating:

[A]lthough the market requires defense counsel to offer competitive rates apparently below what he thinks he is truly worth, defense counsel is paid at the time or immediately following, the time his services are rendered. He further gets paid even if he loses the case. This is not so for Plaintiff's counsel, who, because an ERISA claimant cannot afford to pay by the hour, is forced to await until completion of a litigation in order to obtain a contingency fee, which may, or may not be paid — if the case is lost.

The district court correctly observed that contingency cannot be used to justify a fee enhancement, see Cann v. Carpenters' Pension Trust Fund, 989 F.2d 313, 318 (9th Cir.1993), or an inflated hourly rate, see Davis v. City and County of San Francisco, 976 F.2d 1536, 1549 (9th Cir. 1992), vacated in part on other grounds, 984 F.2d 345 (1993). But as we read Kantor & Kantor's motion, the firm was at least in part explaining that its hourly rate in the prior case took into account the delay in payment that results from the firm's contingency-based system of representation — regardless of whether the case is won or lost. See Missouri v. Jenkins, 491 U.S. 274, 282-83, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989) ("Although delay and the risk of nonpayment are often mentioned in the same breath, adjusting for the former is a distinct issue.") (quotation omitted). Thus it is unclear to what extent, if any, the requested $375 to $400 rates included a "contingency multiplier."

To the extent Kantor & Kantor's motion was addressing delay in payment, that is a factor properly considered in arriving at a...